Story highlights
- Two Chinese directors have sued BN Ceramics Industry Limited and other directors, seeking a court determination on major company control based on share allocation.
- Plaintiffs allege improper share allotment, violating several sections of the Companies and Allied Matters Act and altering BN Ceramics’ share structure to benefit BN Technological Services.
- The Federal High Court in Abuja transferred the case to the Lokoja Division, agreeing that the matter should be heard there due to jurisdictional reasons.
Two Chinese directors, Yang Jijian and Hao Aijun, have sued BN Ceramics Industry Limited, Kogi, and other Chinese directors before a Federal High Court in Abuja for the determination of who has major control of the company in terms of shares.
The legal team of the plaintiffs joined BN Ceramics Industry Limited, Liu Yangxi, Zhang Qide, Chen Enlai, NB Ceramics, BN Technological Services, Abuja, and the Corporate Affairs Commission (CAC) (first to seventh defendants), in the suit marked FHC/ABJ/CS/ /2022.
BN Ceramics Ltd is a Chinese-owned company in Nigeria which deals with the manufacturing of ceramic and porcelain tiles for distribution to building material stakeholders across the country.
The company owns a production base with two authentic polishing automatic lines at Ajaokuta, Kogi State; two main depots; and a distribution network of about 260 distributors.
The company is also a member of the Manufacturers Association of Nigeria (MAN) and is registered with the Corporate Affairs Commission (CAC).
The plaintiffs sought a declaration that the allotment of shares of BN Ceramics Ltd by the defendants is in contravention of Section 46(1), Section 141, Section 142, and Section 153(2) of the Companies and Allied Matters Act 2020 as well as the provisions of the Articles of Association of the company.
Section 153 of CAMA frowns upon alleged irregular allotment of shares, especially if it is not from a public company’s statutory meetings.
Plaintiffs Case
Barrister Babajide Lawal told Justice Inyang Ekwo that on December 8, 2013, the company in dispute was incorporated as a private company limited by shares with 10 million ordinary shares.
Ordinary shares are shares in a company that grant their owners the right to vote at company meetings and to receive a portion of the company’s profits.
The lawyer added that the company subsequently increased its share capital from 10 million ordinary shares to 20 million ordinary shares. Following this increase, the un-allotted shares of the company were distributed among the directors.
According to him, Yang Jijian was allotted 5,664,000 ordinary shares (28.32%), Liu Yangxi received 4,760,000 shares (23.80%), while the remaining defendants had allotments of 21%, 18.88%, and 8%, respectively.
He contended that on April 19, 2022, three days before the company’s scheduled meeting, a notice was sent to members stating that significant share transfers had occurred, displacing his clients from being the top shareholders.
He added that the share structure of BN Ceramics had been altered and that BN Technological Services had been allotted 10,480,000 shares in the company (out of 20 million shares), making BN Technological Services the new majority shareholder.
He alleged that the actions of Liu Yangxi, Zhang Qide, and Chen Enlai were intended to transfer control of BN Ceramics Industry to BN Technological Services without the knowledge, consent, or agreement of the plaintiffs, in violation of relevant laws.
He asked the court to declare the development null and void.
Meanwhile, counsel for the company and the other Chinese directors, Nnamdi Nwaiwu, asked the court to decline hearing and determining the matter.
He drew the attention of the court to the fact that some of the defendants are residents in China, a place outside the jurisdiction of the Nigerian Court.
He then asked the court to strike out or dismiss suit.
What the judge said
In his judgment delivered on June 14, 2024, a copy of which was seen by Nairametrics, Justice Inyang Ekwo stated that the proper court to decide the matter is the Lokoja Division.
He declined to strike out the case and instead transferred it to the Lokoja Division of the Federal High Court.
The judge said:
“Upon studying the averments on this issue, I agree with the position of the first defendant that this matter ought not to have been commenced in this Judicial Division but in the Lokoja Division.
“By virtue of this position, this Court cannot venture into any other point canvassed in the preliminary objection. Those issues are now to be determined by the Lokoja Division of this Court.
“I therefore make an order transferring this suit to the Lokoja Division of this Court.”
Nairametrics reports that trade relations between Nigeria and China are significant, as numerous Chinese businesses have a strong presence in Nigeria.
According to the Nigerian Bureau of Statistics (NBS) Nigeria’s foreign trade statistics report for Q1 2024, China was Nigeria’s largest import partner with over N6 trillion in imports.